Dell on Thursday wrote in an SEC filing that it considered other strategic alternatives to going private, including the possibility of selling off its PC or financial services business.
Dell, in a Thursday SEC filing it said was written in response to questions about the process leading to the board of director's approval for Dell's $24 billion-plus leveraged buyout, also detailed the role CEO and largest shareholder Michael Dell played in negotiations and the process behind determining the per-share price of the privatization move.
The SEC filing also comes after several investors have balked at approving Dell's privatization plans. The investors expressed concerns that the move undervalues their investments in the company.
Michael Dell in August of 2012 told Dell's board of directors he was considering taking the company private, after which the board formed a special committee of four independent directors to evaluate Michael Dell's proposal and possible alternatives.
The special committee, which met over 25 times in addition to having six meetings with other independent directors, met with three different private equity sponsors that were permitted to conduct due diligence and to make proposals to acquire Dell.
Those companies were not permitted to interact with each other and could not reach any agreement with Michael Dell without the special committee's prior consent. Michael Dell also agreed to work in good faith with any bidder for Dell and assured the special committee he would work on any alternative strategies to going private.
Those considered alternatives included, among others, having Dell continue as a public company with no change in business plan, modifying the company's business plan, segmenting its PC business into a separate organization, disposing of its financial services business, accelerating its business transformation with more acquisitions, and either selling to or merging with a strategic buyer, Dell wrote in the SEC filing.
"After this review, which spanned over five months and involved substantial input from the Special Committee’s financial advisers and its management consultant, the Special Committee unanimously concluded that the going private transaction was in the best interests of Dell’s stockholders," Dell wrote.
NEXT: Parallels Between Dell And HP Proposals To Spin Out PC BusinessDell's decision to consider spinning out its PC business was similar to rival Hewlett-Packard's 2011 announcement that it would spin out its PC business into a separate company.
However, unlike HP, which lost much investor confidence and much of its market capitalization before finally dropping plans to break itself up, Dell kept its plans a secret until Thursday's SEC filing.
The $13.65 per share price of the leveraged buyout was determined by negotiations between the special committee and venture capital firm Silver Lake Partners starting in late October. One other unnamed "financial sponsor" also made a bid at that time. The special committee asked for new bids from the two, after which that second financial sponsor dropped out while a third unnamed "financial sponsor" was invited to bid. That firm also eventually withdrew.
Eventually, Silver Lake Partners agreed on a price of $13.65 per share on the condition that Michael Dell, Dell's largest shareholder, and "related persons" would roll their shares into the deal at $13.36 per share.
To reassure investors they are getting the best possible deal in Dell's privatization plan, the special committee, assisted by Evercore Group, a New York-based independent investment banking advisory firm, set up a 45-day "go-shop" period to solicit, evaluate and potentially enter into negotiations with other companies about alternate proposals.
Should another company place a successful competing bid, it would be subject to a $180-million termination fee if it dropped out. Dell, in its SEC filing, said the fees it is paying Evercore "are structured to strongly incentivize them to obtain any superior proposal that may be available."
A stockholder meeting to vote on the final proposal is expected to be held in June or July, depending in part on the timing of the SEC review process, Dell wrote.
PUBLISHED FEB. 15, 2013